2020 (3) TMI 305 - HC - VAT and Sales Tax

Maintainability of appeal - appeal was dismissed for non-payment of pre-deposit - HELD THAT - The Tribunal could not have ordered to pay an amount of pre-deposit on the basis of the turnover. The amount of pre-deposit is to corelate with the amount of tax demand and not with the amount of turnover of the assessee. We modify the order passed by the Tribunal and substitute the amount of pre-deposit being 5% of the tax demand, as condition precedent of entertaining the appeal, under Section 73(4) of the VAT Act. Petition allowed.

Summary

Issues:
1. Disallowance of input tax credit by Commercial Tax Authorities
2. Dismissal of First Appeals by First Appellate Authority for non-payment of pre-deposit
3. Tribunal's order directing pre-deposit of ?1 Crore
4. Challenge to Tribunal's order by the petitioner
5. High Court's decision on the modification of the Tribunal's order

Analysis:

1. The petitioner, a Public Limited Company engaged in the manufacture and sales of iron and steel products, had its accounting records seized by Commercial Tax Authorities. Disallowance of input tax credit was made for purchases from vendors with cancelled Registration Certificates, leading to demands under the VAT Act and CST Act for 2011-12 and 2012-13.

2. First Appeals by the petitioner were summarily dismissed by the First Appellate Authority for non-payment of pre-deposit, which was set at 30% of total dues for 2011-12 and unspecified for 2012-13, resulting in an appeal to the Tribunal.

3. The Tribunal directed the petitioner to make a pre-deposit of ?1 Crore against a total demand of ?31,22,58,649, citing the need to ensure the basic minimum tax liability and considering turnover growth, cancelled Registration Certificates of vendors, and lack of evidence on purchases' genuineness.

4. The petitioner challenged the Tribunal's order, leading to the High Court's consideration. The High Court found fault with the Tribunal's reasoning, stating that pre-deposit should correlate with the tax demand, not turnover. Consequently, the High Court modified the pre-deposit amount to 5% of the tax demand as per Section 73(4) of the VAT Act.

5. The High Court allowed the petition, modifying the Tribunal's order and setting the pre-deposit at 5% of the tax demand. The rule was made absolute without costs, emphasizing the need for the pre-deposit to align with the tax demand rather than the turnover of the assessee.